Frequently Asked Questions About Colorado Mortgage Loans
The home buying process can feel like an overwhelming and complex process. There are many questions that go through a potential home buyer’s mind. Let our FAQ put some of those questions and concerns to rest before speaking with us further.
None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important – you’ll pay less than half the total interest cost of the traditional 30-year mortgage.
However, if you can’t afford the higher monthly payment of a 15-year mortgage don’t feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don’t worry, the data used to calculate your credit score doesn’t include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don’t limit your mortgage shopping for fear of the effect on your credit score.
Automated monthly payments are available. At the loan closing an automated payment application will be provided. Simply return it at your earliest convenience to enroll in the automated payment program.
If you won’t be able to attend the loan closing, contact your Loan Officer to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we’re able to mail you the documents in advance so that you can sign them and forward them to the closing agent. We’re sure to have a solution that will work in your circumstances.
The documentation required for each loan differs depending on the loan program. While some programs require income, employment, and asset verification, others require no documentation at all. Your mortgage consultant will provide you with a list of items needed.
Yes, there are loan programs that do not require a down payment. If you and/or the property you are purchasing meet certain credit, employment history, location and other determining factors, a zero-downpayment loan may be an option for you. Contact one of our mortgage consultants to see if this is an option for you.
Mortgage insurance protects the lender against taking a financial loss in the event the mortgagor stops making payments. It is required on mortgage programs that require little or no down payment and the lenders exposure is greater than 80% of the purchase price or appraised value, whichever is less.
Mortgage insurance can be avoided by utilizing loan programs such as an 80/20, in which a 1st mortgage (80% LTV) and 2nd mortgage (20% LTV) are taken on the property. No down payment is required. Or, there is Lender Paid Mortgage Insurance (LPMI). With this option, the lender pays the mortgage insurance, which is offset by a higher interest rate charged to the borrower.
Yes, it’s possible to get approved for a mortgage loan after a bankruptcy filing. Depending on the type of filing — Chapter 7 vs. Chapter 13 — and other factors, you may have to wait anywhere from two to four years before you can get another mortgage loan. Short sales and foreclosures are different. Give us a call to discuss your options.
Government backed loans have become an increasingly attractive option for borrowers. With the ease of qualification and enticing low interest rates, these loans provide many borrowers with access to affordable mortgages. There are FHA, VA, USDA Rural Housing programs that require little or no down payments, no pre-payment penalties, and limited amounts of certain fees and charges the borrower must pay to establish the loan. These programs also have rates that are comparable to conventional loans.
Adjusted Rate Mortgages have variable interest rates – interest rates that change on monthly basis depending on market conditions. Rates are determined by adding a margin to an index on a specific date.
A balloon loan is a short term loan with payments amortized over a longer period of time. These payments are not sufficient to pay off the loan in full within the term of the loan. The remaining balance, known as the balloon payment, is due in full at maturity of the note.
Your monthly mortgage payment includes a payment to the principal balance, interest, and escrow, otherwise known as P.I.T.I. (principal, interest, taxes and insurance).
Pre-qualification is a lender’s judgment of your ability to make payments on your mortgage, based on your verbal statement of income, assets, and employment history. Pre-approval is the underwriting decision that you are conditionally qualified and is subject to the lender’s review of your completed application, verification of your income, assets, employment history, credit check, appraisal and other determining factors.
No, applying online is free.
You will receive a phone call from one of our mortgage consultants within 24 hours (during standard business days) of submitting your application. Depending on the complexity of your loan scenario, the pre-qualification process is fairly quick. A “pre qual” is a guide as you go through the home buying process. It does not guarantee you will be approved for the mortgage.
The interest rate is the rate you agree to pay for your mortgage loan. It is used to determine the interest portion of your monthly payment. The annual percentage rate (APR) includes your interest rate and prepaid finance charges to give you an average yearly rate.
A discount point is generally a percentage of the loan amount and is paid to the lender to buy down or lower an interest rate.
An escrow account is set up to collect your payments for property taxes, homeowners insurance and possibly other items, in equal amounts over a 12-month period, to be paid on your behalf when those bills come due.
A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.
It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan; e.g. ‘2 points’ means a charge equal to 2% of the loan balance.